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- Judging by a recent webinar we conducted on Asian ferroalloys last week, many market participants believe the steel and steelmaking raw materials’ world - outside of China - will record an 'L' shaped recovery, effectively failing to recover. With crude steel production outside of China falling close to a third in April and over a quarter in May compared to the previous year, it is a very bearish attitude to think this situation can be the new normal to us.
- Our team also discussed the impact of China's infrastructure investments on the country's steel industry and the rebar market, in particular, at the webinar, with some 15 million tonnes of additional rebar demand forecast as a result of the new investment plan. Consequently, Chinese domestic scrap prices will likely receive some support from the planned infrastructure investment, however, scrap collection and generation in China should also continue to improve while business activity recovers after it was stifled earlier this year due to the Covid-19 pandemic. Higher supply will mitigate the potential sharp scrap price increases and we believe price competitiveness is important for integrated mills when considering higher scrap intake, which will cap scrap prices that are currently at a premium over and above hot metal production costs, we estimate.
- In the Turkish scrap market, the landscape may be changing this year following the introduction of the new quota system for steel imports in Europe. The new quarterly EU quotas will limit Turkish steel producers' ability to move volumes as heavily into Europe over such a short period in comparison to last year, and may result in Turkish scrap purchases being spread more evenly over the coming 12 months, we believe. Therefore, we expect Turkish scrap prices will likely fall in the coming month, while the announcement of the change in EU finished steel import safeguard measures should dampen scrap buying after it had been reasonably healthy recently.
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